Question

Like many college students, Melanie applied for and got a credit card that has an annual percentage rate (APR) of 12%. The first thing she did was buy a new stereo system for $400. At the end of the month, her credit card statement said she only needed to make a minimum monthly payment of $15. Assume Melanie makes her payment when she sees her statement at the end of each month. If Melanie doesn't charge anything else and only makes the minimum monthly payments, approximately how many months would it take her to completely pay off the stereo system

Answer 1

31.17 months

Step-by-step explanation:

For computing the number of months required to pay off the stereo system we need to apply the NPER formula i.e be shown in the attachment below:

Given that,

Present value = $400

Future value = $0

Rate of interest = 12% ÷ 12 months = 1%

PMT = $15

The formula is shown below:

= NPER(Rate;PMT;-PV;FV;type)

The present value come in negative

So, after applying this, the number of months is 31.17 months